THE United States' trade gap with China widened by 7.4 per cent in August to US$2.43 billion, although its deficit with the world shrank by 6.8 per cent to $9.7 billion, the US Commerce Department says. The overall narrowing was due to a rebound of sales in overseas markets after two weak months. In trade with Hong Kong, the United States turned from a deficit of $184.1 million in July to a surplus of $35.9 million in August. Exports grew by three per cent to $38.2 billion, reversing two months of decline in June and July, while imports increased by a fractional 0.8 per cent to $47.9 billion. The monthly trade shortfall was significantly smaller than Wall Street economists' expectations of $10.5 billion. The August improvement in the US trade performance will benefit the economy, especially since it comes from stronger exports. Nonetheless, the department said data for the first eight months of 1993 indicated the full-year deficit was heading for $115 billion, well above the 1992 total deficit of $84.5 billion. Additionally, the politically sensitive deficit with Japan climbed in August to $5.26 billion from $4.74 billion and accounted for more than half the total trade gap. That is the biggest monthly shortfall with Japan since April when the deficit was $5.5 billion. The Clinton administration is pressing Japan's new government to cut its taxes in order to put more money into consumers' hands so that they will buy more imports. The US economy has been expanding weakly, with gross domestic product growing at only a 1.3 per cent annual rate in first half. Consumer confidence remains at low levels because of the tight job situation and higher taxes. Trade has become a weak spot because overseas markets remain so soft that exports are unlikely to provide a major push for the slow-paced recovery. The White House is lobbying hard for congressional passage of the North American Free Trade Agreement which proposes bringing Mexico into a duty-free trading zone with the US and Canada. US unions fear potential job losses if companies shift production to Mexico because of its low wages, but Treasury Secretary Lloyd Bentsen warns that failure to approve it will give Japan and Europe a toehold in Mexico's booming market.